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After a Decade, Chapter 2 Program Offers Timely Lessonson the Use of Block Grants

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Washington--The federal government's experiment in block grants for education will be 10 years old this year, and, depending on who is doing the judging, the results can be characterized as anything from a smashing success to a catastrophe.

During the tumultuous budget debates of 1981, the Reagan Administration scored its only major legislative victory in education when it persuaded the Congress to consolidate 28 categorical programs into the Chapter 2 block grant, allowing school districts to use the funds for any of the purposes served by the old programs.

Today, with new block-grant proposals by the Bush Administration and key state-policy groups on the table, many observers say a look at Chapter 2 can provide telling clues about the viability of the block-grant concept in education.

Bush Administration officials and conservatives hail Chapter 2's unfettered flow of federal dollars to districts as a boon to local creativity.

"From a school administrator's point of view, it may be the best piece of money available under a federal program, because it can be used in so many ways to influence educational change and improvement," said John MacDonald, assistant secretary for elementary and secondary education. "It's very popular with local districts."

As a school superintendent in Groton, Conn., Mr. MacDonald recalled, he devoted his district's first Chapter 2 grants to staff development, the acquisition of technology, and effective-schools programs.

"It gave us the latitude to do a lot of extras that we couldn't do with the local revenue base," he said.

Jeanne Allen, education analyst for the Heritage Foundation, offered a similar assessment. "It's the only program from the federal government that gives school districts discretion, that acknowledges the diversity and differences between different communities," she said.

For many education lobbyists and Congressional aides, however, the consequences of Chapter 2 have been largely negative.

"If you compare it to the programs it replaced, it's a dismal failure," said Michael Edwards, director of Congressional relations for the National Education Association. "It resulted in the wholesale elimination of those programs in most states and was clearly a surreptitious effort to eliminate programs and reduce funding."

The damage caused by the switch from categorical programs to Chapter 2 has fallen hardest on urban school systems, said Bruce Hunter, associate executive director of the American Association of School Administrators.

"The tragedy was that the cities lost big bucks and there was no longer really a federal role in desegregation," Mr. Hunter said.

John F. Jennings, Democratic counsel to the House Education and Labor Committee and a key staff aide during the 1981 debates, noted that Chapter 2 has frequently faced funding problems in the Congress.

"Its value at the local level is its weakness on Capitol Hill, in that the appropriations committees can't see where it has any focus and its funds keep getting cut," he said.

Still, even those who criticize the program say it has had some good effects.

"First, all the money went to computers, and now a lot of it goes to staff development, both of which have turned out to be good for American education," Mr. Hunter said.

"On the positive side," Mr. Edwards observed, "it's the one federal program that provides flexibility in terms of a wide variety of uses to improve education."

Preserving Title I

Chapter 2 was created in the wake of Ronald Reagan's sweeping 1980 victory, which gave the new President a Republican majority in the Senate and enough political momentum to put his program of tax cuts and sharp cutbacks in federal spending and regulation into action.

The Administration originally proposed an even larger block grant, which would have included special and vocational education and the Title I compensatory-education program, the cornerstone of the federal effort in precollegiate education.

Education's supporters in the Congress, including some key Republicans, succeeded in preserving the separate, categorical identity of those programs. Many Title I regulations were repealed, however, and the program was renamed Chapter 1 of the Education Consolidation and Improvement Act.

But, despite strong opposition from House Democrats, more than two dozen small, categorical programs were combined into a block grant as Chapter 2 of that act.

"The idea was to preserve Title I but to put as many programs as possible in otherwise, to move as much decisionmaking as possible to the state and local level," said Charles W. Radcliffe, a former Republican staff director for the Education and Labor Committee who is generally credited with being the author of Chapter 2.

The two largest programs folded into Chapter 2 were the Emergency School Assistance Act, which aided desegregation efforts, and a program that funded the acquisition of educational and library materials. The other components were a hodgepodge of smaller programs, including metric education, consumer education, ethnic-heritage studies, and "population education."

Some of the consolidated programs were formula grants to states and districts, some were competitive at the state level, and many were federally run competitions.

Under the block grant, funds are distributed to states based on their school-age population. At least 80 percent of a state's grant must be funneled to school districts, based on population and the number of ''high cost" children a district serves. State agencies can use up to 25 percent of their share to administer the program; the rest must be spent on technical help or state-run programs.

"Our members wanted most of the funds to flow to school districts, but we also kept in mind that with many programs in our schools, the success or failure can depend at least partially on state involvement," Mr. Radcliffe recalled.

The original law allowed states and districts to spend the funds on any project that would have been allowed under one of the precursor programs.

When the program was reauthorized in 1988, the Congress replaced that rule with a list of six subject areas. Those areas are so broad, however, that observers say the change probably has had relatively little effect on the program.

The new program was funded at $442 million its first year, which corresponded to the 1982-83 school year. The previous year, the precursor programs had received $497 million.

The cutback in support was greater than those figures suggest, however, because the Reagan Administration had already won huge cuts in the precursor programs. In 1980-81, schools had received almost $713 million under those programs.

'A Big Win for Most'

Although the total amount of money was less, some states and most districts actually received more under the block grant than they had under the categorical programs. Funding under most of the precursor programs had gone either to districts with particular needs or to those who successfully competed for grants, while every district got a share of Chapter 2.

"It was a big win for most districts, but a big loss for the cities that had good grantsmen," Mr. Hunter said.

Three-quarters of all districts received more money under Chapter 2, according to a 1986 report done by sri International for the Education Department.

"The redistributive effect of the block grant was simple and profound: on average, districts that had received the most under antecedent programs--very large urban districts--lost large amounts of funds while all other size categories gained," the study concluded.

Nationally, the report said, there was "no obvious shift in funding away from higher concentrations of poor children," but that "does not apply to the largest urban districts."

Michael Casserly, associate director of the Council of the Great City Schools, said several factors combined to hit his group's members.

"The total went down, 20 percent stayed at the state level, private schools took a bigger share. This was distributive, while some of the antecedent programs were based on need," he said. "The combination of these factors really socked the big cities."

The urban school systems represented by the Council of the Great City Schools received a total of almost $104.6 million from precursor programs in the 1981-82 school year. Under Chapter 2 the following year, they got only $61.6 million, according to the council.

Organizations representing cities are among the strongest opponents of current block-grant proposals backed by the Bush Administration, the National Governors' Association, and the National Conference of State Legislatures. (See Education Week, April 17, 1991.)

Detroit's Lost Programs

Detroit, for example, received $4.5 million in 1981-82 and $3.3 million in 1982-83.

The cities' losses were even more dramatic when compared with funding levels before the 1981 budget cuts took effect. In the 1980-81 school year, the city schools received a total of $152.3 million, of which Detroit got $7.3 million.

The effect on big-city school systems was substantial. Detroit used all of its 1982-83 grant for desegregation costs, and so was forced to curtail special programs in such areas as dropout prevention and career education and to stop providing staff training in computer literacy, a district official said at a 1983 Congressional hearing.

Eight years later, the situation in Detroit appears little changed. The district received slightly less than $3.2 million from the program this year, and all of the money is used to support educational programs that were launched as part of its desegregation effort, according to Sheldon Sofer, the system's acting director of grant procurement.

"There's just less money and fewer programs," he said, acknowledging that the district has not taken advantage of the flexibility offered by Chapter 2 even though the district is no longer under court order.

"That's not to say some new superintendent wouldn't change that," Mr. Sofer said. "But I think it shows you that the programs are really needed."

The loss of E.S.A.A funds hurt urban districts the most, and civil-rights advocates say it also set back desegregation efforts.

The E.S.A.A. money was "a carrot for compliance," and Chapter 2 eliminated "a very effective tool for reducing racial and ethnic discrimination," Cynthia Brown, who was the Education Department's assistant secretary for civil rights in the Carter Administration, said at the 1983 hearing, which was held by the House subcommittee on intergovernmental relations.

A Redistributive Approach

Advocates of block grants concede that consolidating programs will almost inevitably take funding from the most troubled areas--primarily large cities--which receive disproportionate shares of grants targeted at needy populations. But, supporters say, the benefits of the block-grant approach outweigh its costs even for those districts.

"They now spend so much money making sure that they comply with the rules of the various programs that they might actually come out ahead," Ms. Allen argued.

In addition to spreading education funds out to smaller, nonurban districts, Chapter 2 also had the effect of redistributing federal aid within districts and even within schools--thereby, critics say, diluting the impact of the funds.

Chapter 2 money is not earmarked for any particular schools, students, or purposes, and districts deciding how to use it do so amid pressure from competing groups. States, similarly, must divide their funds among competing constituencies.

"There appears to be a tendency under the block grant to provide 'a little something for everyone,' rather than concentrating resources in ways that may benefit fewer students, or fewer districts, more intensively," the SRI report said.

"First, except in very large districts, there is a tendency to serve all schools in a district rather than some," the report said. "Paralleling this pattern, districts tend to direct block-grant funds toward activities that benefit all kinds of students rather than selected target groups."

According to the report, instructional services purchased with Chapter 2 were most likely to be targeted at disadvantaged students, while computer programs were slightly more likely, and curriculum projects twice as likely, to be aimed at gifted students. But the vast majority of districts reported that their Chapter 2 programs benefited "all types of students."

The advent of Chapter 2 also clearly aided private schools at the ex4pense of public schools. Sri found that more than three times as much money was available to private schools under the block grant as was available under the antecedent programs.

Fostering School Improvement

While the funds retained by state agencies represent a relatively small part of the total, the Chapter 2 program "is the major source of federal funds states use to foster educational improvement," according to an Education Department study completed in February of this year.

In fiscal 1989, states reserved about $90.9 million for their own use, and only four reserved less than the 20 percent maximum, the study found. Over all, 16.8 percent of the amount reserved was used to administer Chapter 2 programs.

Schoolwide improvement programs received a significant proportion of state funds, 42 percent. This was probably due to a requirement that states spend at least 20 percent of their Chapter 2 money on "effective schools" projects, the report said, while noting that eight states received waivers from that mandate.

States reported supporting a wide variety of programs, including workshops for educators, statewide clearinghouses, competitive grant programs, and creation of new methods to assess student and teacher performance.

The department is expected to release a study next month on districts' current uses of Chapter 2 funds.

According to the 1986 sri study and recent interviews with educators familiar with the program, the most popular use of Chapter 2 funds at the local level has consistently been the acquisition of computers and library materials.

In the 1984-85 school year, computer-related purchases were made by 72 percent of districts and accounted for 30 percent of all Chapter 2 expenditures, sri found, while library materials were purchased by 68 percent of districts and comprised 29 percent of expenditures.

That same year, 27 percent of districts used Chapter 2 funds for staff-development projects, 25 percent for curriculum development, and 16 percent for instructional services.

The distribution of spending was similar for private schools, but the dominance of computer and library expenditures was even more pronounced.

These patterns are generally consistent with the way districts used funds under the antecedent programs, the largest of which supported the acquisition of library and other educational materials. But far more districts used Chapter 2 funds to buy computers than had previously been the case, according to sri.

Many of the smaller districts that had not received funds under precursor programs viewed Chapter 2 as their opportunity to join the computer age, the report suggests.

A Shift in Focus

The biggest difference compared with the previous programs was that less federal money was devoted to desegregation programs. While funding for the E.S.A.A. totaled $145.3 million in its final year, no more than $37 million was devoted to desegregation purposes in 1984-85, SRI estimated.

The focus of curriculum and instructional projects supported by Chapter 2 is also different, the sri report suggests. Although districts did devote funds to some of the specialized areas targeted by precursor programs, such as health and "multicultural awareness," the report concludes that curriculum development supported by Chapter 2 most frequently emphasizes "core academic areas," vocational education, and computer science, while instruc4tional services most often focus on basic-skills instruction.

"Essentially, a lot of the little programs were eliminated," Mr. Edwards observed. "We have not seen any evidence that state and local agencies picked up those expenditures."

"There is little question that Chapter 2 grants have been used for things that are politically popular rather than for what constitutes the best use of the dollars," he contended.

Mr. MacDonald argued, however, that the direction of Chapter 2 expenditures follows general trends in education, and that the focus of federal programs would have shifted that way even without block grants.

"We've seen an emphasis over past years on such things as the wider application of technology, things that have only been around for the last decade," he said. "Educational directions have changed, and that influenced the direction of expenditures under the block grant."

'Evidence of Failure'

Critics of Chapter 2 say the program provides ample support for most of the arguments made against block grants. The program has been accused of redistributing funds at the expense of the neediest recipients, diluting the impact of programs, and leading to overall cuts in spending.

"It's a wonderful piece of evidence of the failure of block grants,'' said Gordon M. Ambach, executive director of the Council of Chief State School Officers. "The separate programs lost their identity. Conversely, it allows the Administration to resist new programs by saying, 'You can use Chapter 2 for that."'

Ms. Allen argued that if many or all education programs were combined into a block grant, it might fare better in the appropriations process than Chapter 2.

"If you gave districts the freedom to innovate, you would have a big constituency in favor of flexibility," she said. "If they could use it the way they wanted to and combine it with state money, there would be a lot of inventive programs in the schools."

But most observers disagreed.

"It's a very visible example of going from categorical programs to a block grant to a decline in funding," Mr. Ambach said. "None of the advocacy groups had a strong identification with it."

Although the Bush Administration favors block grants, Mr. MacDonald acknowledges the latter point.

"While it's so popular because of the latitude it gives, it doesn't seem to have a strong advocacy group unless it gets in trouble," he said.

Chapter 2's appropriations, which began at $442 million and currently stand at $448.9 million, have generally hovered around $450 million and peaked at $500 million, in 1985 and 1987. Since inflation has eroded the value of those dollars, funding has effectively decreased.

"If you adjusted for inflation the 1980 funding for the antecedent programs, it would be $1.38 billion," Mr. Edwards claimed.

Mr. Edwards also argued that decisions made by the Congress to re-establish programs similar to some of those folded into Chapter 2 is "evidence of its failure." Some examples are the magnet-schools program, which serves one of the purposes of the e.s.a.a., a gifted-and-talented program authorized in 1988, and last year's environmental-education bill.

"Congress felt it was necessary to essentially reauthorize some of these programs because the block grants weren't meeting the needs," Mr. Edwards said.

Legislation Considered Unlikely

Lobbyists for major education groups, which uniformly oppose the creation of new block grants, predict the Congress is unlikely to approve new consolidations in light of the experience with Chapter 2.

Not only have political conditions, including partisan control of the Senate, changed substantially since 1981, the lobbyists say, but also educators' frustration with prescriptive federal regulations is no longer as pressing--at least in part because of Chapter 2 and changes in the Chapter 1 program.

"If they can sell block grants on Capitol Hill, I'll push a peanut down Pennsylvania Avenue with my nose," Mr. Hunter said.

"Keep in mind that many of the Democrats who fought the Administration in 1981 are now in the [Congressional] leadership," he said. "These guys lived through this once before; they got burned real bad by this."

Mr. Jennings of the House education panel gave a similar prognosis. ''There is no way on God's green earth we are going to block-grant the major education programs," he said. "Anyone who thinks that is being foolish."

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